The Indian pharmaceutical industry will grow between 7-9% in FY22, driven by domestic and emerging markets in the next few quarters, says a study.
Revenue growth for a sample set of 21 leading Indian pharmaceutical companies was moderate, at 6.4%, in Q2 FY22, down from 16% in Q1 FY22, says research firm ICRA. Normalisation of the base and pricing pressures in the US market were the major reasons for slowing growth momentum in Q2 FY22, even as growth under domestic and emerging markets remained healthy.
Despite Covid-19, the sample companies reported a 15.3% year-on-year growth in domestic revenues, against a 14.6% y-o-y growth for the Indian pharmaceutical market. A combination of steady normalisation in hospital footfalls and field force operations continued traction in acute therapies, and better pricing supported healthy revenue growth across companies. Going forward, sustenance of trend in doctor visits and elective surgeries given the news around the Omicron variant, and performance of new launches in addition to revenue growth momentum in the acute segment will remain key monitorables, points out ICRA.
“Revenue growth for ICRA sample set is estimated at 9-11% in FY22 and in FY23, supported by gradual recovery post the impact of Covid-19. In FY22, growth of 13-15% in the domestic market, 14-16% in the emerging markets and 9-11% in the European business, even as growth under the US business is expected to remain muted given the pricing pressure. The growth for the US and European markets also remains sensitive to depreciation of the rupee against the USD/GBP/EUR,” says Mythri Macherla, assistant vice president and sector head, ICRA.
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However, ICRA expects profits to shrink for these companies. "Going forward, the Covid-19 related improvement in margins will taper down. This combined with headwinds such as pricing pressures and rising raw material costs are expected to result in margins contracting to 22.5% in FY22 and further to pre-Covid levels of 21-22% in FY23, though the same will continue to remain healthy,” says Deepak Jotwani, assistant vice president and sector head, ICRA.
The study says revenues from the US market, where the majority of India's leading generic companies earned the most for over a decade, is stagnating. The revenue growth for the sample set remained muted at 1.9% during the second quarter, owing to high single digit to low teens price erosion and past inventory liquidation given the Covid-related uncertainties. Companies are focusing on specialty products, injectables, complex generics including first-to-file opportunities to improve margins for the US business, which has been impacted by the pricing pressure. Going forward, improved product mix is expected to contribute to price stabilisation. Overall, ICRA expects mid to high single-digit price erosion in the US in FY22.
As against the US pressure, the emerging markets clocked a robust 30.6% y-o-y growth in Q2 FY22, driven by new launches, low base, strong demand and rupee depreciation. Revenue growth from Europe also witnessed 12.3% growth, driven by improving demand for non-Covid products in addition to new product introductions, rupee depreciation and expanding market coverage.